In sync with the new set of rules pertaining to Tax Deducted at Source (TDS) on cash withdrawals set to come into effect this month, the income tax department introduced a new tool for calculating TDS rate under section 194N and enabled it in the department’s e-filling portal.
The new functionality is likely to make it convenient for the financial institutions in completion of calculation.
However, the service is, exclusively launched for official use by banks, co-operative societies and post offices. One can find it under the ‘Quick Links’ section on the e-filing portal, where a new sub-section is added called ‘Verification of applicability u/s 194N’.
In a bid to verify the applicability of TDS rate, one can click on the link and furnish his or her PAN (Permanent Account Number) and mobile number where an OTP will be shared. Lenders and other financial institutions can make use the facility for calculating the TDS rate applicable in your case.
One may also be required to ink a declaration letter along with a copy of acknowledgment of return of Income (ITR-V) of FY 2018-19, FY 2017-18 and FY 2016-17 for verification process.
For discouraging cash transactions and promoting less-cash economy, a new section 194N was included in the Income Tax Act. As per the rule, TDS at the rate of 2 percent will be levied on cash payments of over Rs 1 crore in aggregate performed during a year by a bank or cooperative bank or post office to any person from an account owned by the recipient.
With effect from July 1 this year, further amendments have been made in the rule to sync TDS with the filing of income tax return (ITR). In case, you have not filed your ITR for the last three years, lenders will levy TDS of 2 percent on cash withdrawal in excess of Rs 20 lakhs to Rs 1 crore. The rate will be 5 percent if the amount is higher than Rs 1 crore.
For regular ITR fillers in the last three years, TDS for cash withdrawals will be charged for upto Rs 1 crore and 2 percent for above Rs 1 crore.